An unprecedented increase in the cost of transactions for Ethereum has been observed in the past few days. According to Etherscan, this is the result of abnormal amounts of fees being collected by miners in comparison to what is normally collected.
The average fees collected over the past week is ten times the normal rate, resulting in the network reaching 5862 ether on 2nd July. The clogging of the Ethereum network resulting from this activity led dApp users to make transactions with high GAS costs and transaction fees.
Speculations point to the controversial business model adopted by FCoin, a Chinese crypto exchange. Etherscan clearly showed a correlation between the most voted tokens on FCoin and the high GAS costs, while the users too observed the transfer of ERC-20 tokens to the FCoin exchange.
MyCrypto addressed FCoin’s controversial business model on Twitter | Source: Twitter
FCoin works by encouraging its users to vote for digital assets that are on the verge of being listed by the form of airdrops. Airdrop refers to the process of a large number of tokens being distributed to a particular user base. The users vote and pick digital assets airdropped by candidates of exchange listings, with the assets that have the highest number of votes being listed to the platform. They can then commence the process of integration.
New blockchains use airdrops in order to increase the number of tokens that are being adopted. In order to build a welcoming community and acquire active cryptocurrency users, blockchains usually distribute their tokens to Bitcoin and Ether users.
The user to transaction ratio for airdrop always needs to be 1:1, meaning that if there are two projects competing against each other and FCoin has 100,000 users, 200,000 transactions need to take place on the chain, as per Ethereum protocol.
Currently, the Ethereum blockchain protocol can barely handle 1 million transactions per day. Owing to how difficult processing large amounts of transactions on-chain is and how long the complete integration of scaling solutions will take cannot be determined. As FCoin functions on the Ethereum blockchain network, this activity immobilized Ethereum throughout the past week.
This chart depicts the Ethereum network transaction fees | Source: Etherscan
In the past week, GAS prices rose to 50 Gwei, which is ten times its normal price, leaving users of the Ethereum network desperate to get their transactions ahead of the pending transactions line. This resulted in the average Ethereum transaction fee rising from $0.2 to $3.5 in just 48 hours. Since FCoin has said nothing about their plans to end the voting process, the fees are expected to continue rising even though they have begun to subside.
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